Amazon.com Inc (AMZN) shares dropped around 15% after a disappointing profit was hurt by increased spending on new technology and delivery services. The company reported net income of $1.00 a share, much lower than the analyst consensus of $1.60 a share. Revenue also missed with $35.7 billion in sales, lower than the expected $35.9 billion. Investors were puzzled over why earnings only increased by $0.55 a share, when revenue climbed $6 billion when compared to the same quarter year over year.
Price action on the Amazon 240-minute chart shows the after-hours drop coincided with a bearish Gartley pattern that formed 30-minutes prior to the US close. Point D was confirmed with both 61.8% Fibonacci retracement of the X to A leg and the 200.0% Fibonacci expansion level of the B to C move. The slide is now tentatively finding support with the $550 support region. If we see further pressure price may eventually target $522.46, which is the 127.2% Fibonacci expansion level of the A to D move. It is around that area that we may look for value investors to start scaling into positions.
If the current slide is short-lived, initial resistance will come $585 resistance level.
The Trade: Buy AMZN at $525, with a stop loss at $495 and a take profit at $585. The Risk/Reward Ratio is 1:2